Canada’s new PM was one of Britain’s most ineffectual central bankers

Those who remember Mark Carney’s tenure as Bank of England boss will recall what a political animal he was.

Then Bank of England Governor, Mark Carney in 2020 (via Bank of England)

Oh dear, poor Canada. And that’s before I even get around to looking at the effects of the tariff regime which the Trump administration is visiting on its closest neighbour and ally.

As Justin Trudeau steps down as leader of the Liberal party and Prime Minster and fades away into history, somewhere which too many Canadians believe he should have been a long time ago, none other than Mark Carney has been elected his successor.

Until the upcoming federal elections – they’re scheduled for 20 October – Carney will therefore be Canada’s PM, having won the contest for the leadership of the party by a landslide with 85% of the members’ votes. Chrystia Freeland, Trudeau’s deputy, came second but couldn’t be seen for dust.

From the beginning I dubbed him

Mark “The Magician” Carney, and for his full tenure as Governor of the Bank of England, I rather disdainfully referred to him as so. He had in the aftermath of the Global Financial Crisis popped up on the then Chanceller of the Exchequer George Osborne’s radar as former Governor of the Bank of Canada and, behold, Canada and the Canadian banking system had been spared the worst of the banking crisis that had so devastatingly visited the USA and Europe.

There was a reason. Both Canada’s - and by dint of circumstance Sweden’s - banks had hit the skids well before the bomb had gone off under those in other countries. Before the wild leveraged credit plays which were eventually to lead to the huge implosion in late 2007, into 2008 – the nadir was reached in September 2008 with the collapse of Lehman Brothers – and beyond, Canadian banks were looking on with their hands tied, having a few years earlier already been bailed out by Ottawa. They felt like the Cinderellas as their Wall Street and City peers were reporting huge profits and they, poor little mites, were not allowed to go to the ball.

When in late 2007, the brown stuff began to hit the propellor and the landmines that were embedded in the global financial system began to go off, first in the fringes and then in the middle, Canada’s banks were never in the news and while the central bankers at the Fed, the Bank of England and the ECB were dancing fandangos to prevent their banking systems from sinking into the swamp, Carney who was at the time Governor of the Bank of Canada sailed along with the dignity of a swan.

That it had been his predecessor at the BoC, David Dodge, who had done the heavy lifting when the Canadian banks had been struggling - and that by the time Carney had arrived, the slate had been already wiped clean - seemed to have escaped Osborne who was looking for a worthy successor to Sir Mervyn King who had rather naively presided over the inflating and bursting of the credit bubble. Carney looked untainted but it had escaped Osborne as to why. He was hailed as the great saviour, something of which I was deeply sceptical and hence “The Magician” a sobriquet I had borrowed from John Le Carré’s masterful “Smiley’s People”.

I don’t think I’m alone in thinking of the narcissistic Carney as having been one of the Old Lady’s most ineffectual Governors, so when he ended his tenure – he had been granted an extension but not a second term – and was replaced in 2020 by the bland Andrew Bailey, I heaved a sigh of relief. He went on to occupy a role at the UN which had more or less been created for him – Special Envoy of the General Secretary for Climate Action and Finance – and now he has hit the big time as Canada’s new Prime Minister.

The last senior central banker to become Prime Minister was nobody less than Mario Draghi although he was appointed as a technocrat and not as a party politician and it would be hard to claim that he had been any too successful in the role. He did of course try to bring some sense into Rome’s politics although anybody who knows how things work in the Eternal City will be aware of the near impossibility to circumnavigate the powerful embedded personal interests that determine decision making long before the wellbeing of the collective is ever considered. This is anathema to the way in which professional and full-time central bankers are trained to think. Altruism is not writ large in Italian politics and poor old St Mario fairly rapidly crashed and burned.

The fact that Carney has emerged as such a keen politician cannot but beg the question as to whether he was ever cut out to be a central banker. Those who remember his tenure at the BoE will recall what a political animal he was and will never forgive him for having first loudly intervened in the Brexit debate and then implementing a monetary policy decision that was blatantly political and a poke in the eye to the victorious Brexiteers.

He is talking a big game in terms of standing up to President Trump and his gang but, as a vocal environmentalist and husband to an equally vocal one, he will surely be placed right in the centre of Trump’s shooting gallery. He arrived to the governorship of the BoC once the worst was over and, to be frank, at the BoE too. I never heard any of his campaign speeches although I’m certain that he will have been touting his crisis management credentials.

Back when his name was first being floated as a possible successor to Merve the Swerve at the Bank of England, a friend of mine dug down and did a bit of due diligence. He read some of his speeches and found a considerable lack of consistency in the opinions he was expressing. It appeared already at the time to my friend, someone whose intellectual discipline I have always admired, that Carney loved to tell his audiences what they wanted to hear but that it was hard, if not impossible, to divine what he himself actually believed. As he carries a Canadian, a British and an Irish passport, and given the possibility that the Liberals will lose power in October, how about President of Ireland next?